August 22, 2019
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How Central Maine Power failed its customers and still increased profits

Linda Coan O'Kresik | BDN
Linda Coan O'Kresik | BDN
Michelle Ricardo from Dixmont is one of many customers who has been having issues with Central Maine Power.

In January, David Ellis, 61, retired from Central Maine Power Co. where he worked for just shy of 39 years as a meter reader, lineman and troubleshooter, a job that required him to fix downed lines and restore power at odd hours and in inclement weather.

The job is demanding, and it slowly became more demanding, and dangerous, as CMP declined to replace workers who retired or left the company, Ellis said, forcing him and his coworkers to work longer and harder.

“You can’t operate like that, not for very long anyway,” Ellis said. “It’s a sad state of affairs.”

In Lewiston, the line workers were getting between 800 and 1,000 hours of annual overtime — almost 20 hours a week — when Ellis left, he said, adding that the workload was “killing them.” CMP was also increasingly relying on contractors who often lacked local knowledge, Ellis said.

On April 19th, after years of declaring the company short-staffed, the union representing CMP workers announced it had reached an agreement to increase staffing at the state’s largest electric utility. The agreement comes as CMP is fighting a multifront battle for public trust, which includes seeking approval for a $1 billion transmission line project, after a series of missteps have eroded its credibility with customers.

In late 2017, the company botched the rollout of its $55 million billing system, prompting regulators to launch an investigation, attorneys to seek a class action lawsuit and ratepayers, thousands of whom continue to believe their bills are inaccurate, to organize. In the aftermath of the rollout, which coincided with a catastrophic October windstorm, the company also failed to bill thousands of customers for months on end, provide accurate information to customers who call the company or show up to appointments, according to regulators.

[Thousands of Maine customers still left behind by CMP]

In wake of the company’s troubles, the Bangor Daily News reviewed hundreds of pages of regulatory and financial filings and interviewed current and former employees, regulators and customers to understand why Maine’s largest electric utility has failed to live up to its long history of service to the state. The BDN found that insufficient staffing was a common issue, and that customer service deteriorated as Spanish energy giant Iberdrola, which bought CMP’s parent company in 2008, reorganized its U.S. holdings under the banner of Avangrid, a publicly traded company headquartered in Connecticut.

And while CMP reduced staff under Iberdrola, the company’s annual net income soared, rising from $58 million in 2007 to $130 million in 2018.

Those profits were driven by the company’s investment in Maine’s infrastructure, Avangrid spokesperson Catharine Hartnett said. Since Iberdrola took over CMP in 2007, “Maine has benefited from over $2.65 billion in investment, creating jobs, paying property taxes and overall contributions to the Maine economy,” she said.

The growth in profits “recognizes the significant investments that have been made in the Company’s facilities and are not related to staffing reductions or cutting corners,” Hartnett said.

While CMP has reduced staff under Iberdrola and Avangrid, the company now appears to be reversing course. The company said it has hired new staff in recent months, and the new staffing agreement with the union serves as the most visible sign of the company’s newfound commitment to hiring, which it says is necessary because of growth in both the number of customers and storms. The agreement runs contrary to what observers saw as Iberdrola’s desire to streamline operations and reduce staff in recent years.

Since Avangrid launched in 2015, CMP, like other utilities under the Avangrid banner, has been moving functions, such as information technology, human resources, accounting and communications, to Avangrid, with the goal of standardizing processes and departments across Avangrid companies.

The idea is that instead of Avangrid subsidiaries like CMP, New York State Electric & Gas Corporation, and Rochester Gas & Electric all having their own IT or HR departments, for example, Avangrid would house a single version of those departments that would serve all Avangrid subsidiaries.

The result is that, in recent years, the number of people working at CMP declined as staff were transferred to the company’s corporate parent or offered early retirement or severance packages.

Avangrid has said this streamlining of operations improves efficiency and benefits customers. But given the problems CMP has had since the corporate reorganization, regulators aren’t so sure.

“The Staff has concerns with the overall quality of utility service currently being provided by CMP,” the Maine Public Utilities Commission hearing examiner Chuck Cohen wrote in March. “The degradation in the quality of service seems to be coincident with the change in Avangrid’s management structure and the removal of operational decisions from the local company.” Cohen added that the service quality issues seem to be “most apparent in customer facing situations.”

Ellis, the longtime CMP employee who retired in January, reached the same conclusion.

“I hate to use the term ‘fall off the deep end,’ but it really did when Avangrid took over,” Ellis said. “The whole model changed. There was no more, as far as I was concerned, customer service.”

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Whether or not the changes made to the company under Iberdrola and Avangrid have been good for customers, they have increased profits. In 2007, the year Iberdrola announced it was buying CMP parent company Energy East, CMP’s net income was $58 million. In 2017, CMP generated $158 million in net income, a 133 percent increase when adjusted for inflation. (The company’s net income fell to $130 million in 2018.)

Meanwhile, the company’s payroll remained flat, rising from $65 million in 2007 to just $74 million in 2018. When adjusted for inflation, that change actually represents a 5 percent decrease.

From December 2013 to June 2018, CMP’s workforce declined from 913 to 808, according to filings at the Public Utilities Commission, a 12 percent reduction. Forty-one of those staff members were transferred from CMP to Avangrid, filings showed.

At the end of 2018, CMP had 815 staff, according to Hartnett. At the same time, Avangrid employed 240 workers in Maine. While these employees are working for Avangrid, they are also, in a sense, working for CMP — along with the seven other electric and natural gas utilities Avangrid owns.

Some of Avangrid’s staff in Maine “had been CMP employees in the past,” said Hartnett, an Avangrid employee who handles press communications for CMP.

Together, Avangrid, CMP and Maine Natural Gas — another Avangrid subsidiary with about 20 staff — employed 1,076 workers at the end of 2018, Hartnett said. Those employees were paid a total of $105 million in 2018, with $75 million going to CMP employees, said Hartnett, who added that Maine ratepayers “do not pay for work done by Maine employees on behalf of companies and customers in other states.”

Avangrid and Iberdrola have been the beneficiaries of CMP’s homegrown talent, said David Flanagan, who served as CMP’s CEO from 1994 to 2000.

“When we were merged into larger companies, CMP had a lot of capable people who were given broader responsibilities and took over leadership positions in other departments in broader parts of New England and New York,” Flanagan said. “At the same time, there has been some loss of local knowledge.”

Former longtime president and CEO Sarah Burns, who retired from the company at the end of 2017, did not respond to requests for comment. Burns is one of a growing number of CMP employees retiring in recent years. In both 2014 and 2015, there were 13 retirements at the company, according to PUC filings. That number rose steadily to 30 in 2016, 38 in 2017 and 51 in 2018.

‘A cautionary tale’

John Hazen has been surveying customers of American electric utilities for more than a decade at marketing research company J.D. Power. When he started, CMP was the “king of the hill” for customer satisfaction for electric utilities its size in the eastern part of the U.S., he said.

But that changed around the time Iberdrola created Avangrid.

CMP was ranked No. 1 for residential customer satisfaction among large electric utilities in the eastern part of the country in the early part of the decade, and still ranked second as late as 2013. But last year it fell to 12th out of 16 utilities.

In 2013, Central Maine Power ranked first for business customer satisfaction among its peer group. Last year, the company ranked dead last, not just among its grouping, but among all 85 American utilities ranked by J.D. Power.

“I use them as a cautionary tale,” said Hazen, who is a senior director of Global Business Intelligence at J.D. Power.

Customer service has been the area with the greatest number of staff reductions at CMP in recent years, according to PUC filings. It’s also the part of the company that regulators have repeatedly warned CMP about.

Since 2016, regulators at the PUC have formally warned CMP six times that it could face consequences for its customer service failures, which included providing inaccurate information to customers and not having adequate levels of staffing at its call center, a violation of PUC rules. In February, PUC staff recommended that the commission reduce the amount of money CMP can make from ratepayers as a penalty for its substandard customer service.

“[S]tarting in 2016 and through the present time, CMP’s performance has significantly and consistently fallen below standards reasonably expected of a utility to provide adequate service,” PUC staff wrote. “Much of the decline in customer service levels can be traced back to insufficient customer service staffing.”

[Class-action lawsuit bid against CMP for high bills stalls until at least October]

A number of people have shared their frustrating interactions with the company. The first time that Michelle Ricardo called CMP to dispute her bill, she was on hold for an hour and 40 minutes, she said. She had moved with her husband, James, and their then-teenage children to Dixmont in the summer of 2016, where they bought a 3,100-square-foot house.

Ricardo, an education technician, decorated the house with lights at Christmas time, until her CMP bills started climbing.

In December 2017, the Ricardos used roughly 1,800 kilowatt hours of electricity, according to bills shard with the BDN. The next year, despite foregoing Christmas lights due to rising electricity costs, their usage nearly doubled to more than 3,100 kilowatt hours, according to their bill statements. As a result, they owed $490 in December 2018, up from $250 in December 2017.

In February, CMP said the Ricardos used nearly 3,600 kilowatt hours, more than double what it billed the previous February, and the electric bill topped $600. The family’s bill was just $70 in October 2017.

Ricardo spent hours on the phone with CMP trying to understand why her electric bills continued to rise as she and her family reduced their usage. When she did reach a representative, Ricardo was told, again and again, that her bills were accurate.

Believing her bills to be incorrect, Ricardo stopped paying them in full. As a result, she received a disconnect notice from the company in March, informing her that her electricity would be shut off if she didn’t pay $254.24 of the more than $900 she owed the company.

But after calling to complain again and prevent her electricity from being shut off, she was told somebody would investigate and call her back, she said. When she finally heard back, she was told she only owed $405.87.

She said that must be a mistake because her previous bill showed an outstanding balance of nearly $1,000. Was some adjustment made? Did CMP realize a mistake and refund her account? No, she was told. That was the amount she owed.

“Where are they even coming up with these figures?” Ricardo said.

Linda Coan O'Kresik | BDN
Linda Coan O'Kresik | BDN
Michelle Ricardo from Dixmont is one of many customers who has been having issues with Central Maine Power.

‘Long overdue’

As part of the company’s reorganization under Avangrid, CMP combined its Augusta and Portland customer contact centers in 2015, and offered voluntary separation packages to staff, according to documents filed at the PUC. While call center management conducted an analysis in 2016 that recommended the company needed 45 additional customer service representatives, the company only sought approval for 14.

Between July 2017 and February 2018, a period spanning the October 2017 windstorm and the company’s new billing system rollout, 25 percent of calls to CMP were answered with a “courtesy message” that informed the customer to call back later, according to the PUC. Those callers were then disconnected. Customers who weren’t disconnected often gave up trying to reach a person due to wait times. The number of “abandoned calls” peaked in late March and early April 2018 at around 40 percent of callers, the PUC said in a February report.

Despite these issues, across 2017 and 2018, 29 customer service staff either retired or voluntarily left the company, the PUC said.

The employees that remained seemed to have concerns about whether they had enough resources to do their jobs effectively, according to the results of a third-party survey of CMP customer service employees conducted in the spring of 2018.

Just a third of respondents agreed with the statement “I have the resources I need to do my job effectively,” according to PUC filings. At comparable companies, two-thirds of employees respond affirmatively to that question, according to the administrators of the survey. A third of respondents also agreed that “The Company is effectively managed and well-run.” At comparable companies, 60 percent agreed.

Also in late 2017 and early 2018, PUC staff noted they began hearing from customers and contractors that CMP “was often not showing up for field appointments or was cancelling long scheduled field appointments for no apparent reason.”

[As Maine debates 145-mile electric line, energy giant with billions at stake is absent]

The company has since added customer service employees, including 20 after the October 2017 windstorm, said Avangrid spokesperson Hartnett. CMP also recently hired 13 apprentices from the Kennebec Valley Community College lineworker program, Hartnett said.

According to IBEW 1837, the union that represents CMP workers, the new agreement signed in April, if implemented, would immediately increase the minimum number of the company’s union employees, which include customer service as well as field staff, from 546 to 606, with a goal to increase minimum union staffing to 665 by 2024, a 22 percent increase over current levels.

“I feel comfortable saying, when fully implemented, this will have a huge impact on CMP and power restoration, customer service, and new services,” said IBEW 1837 business manager Dick Rogers, who noted that the added numbers will also increase worker safety.

The new agreement may represent a shift toward more local control, according to Public Advocate Barry Hobbins.

“I believe the decision making is not like the old Central Maine Power Company,” Hobbins said. “But having said that, I believe that because of all the bad publicity and the lack of trust of many of their customers, it looks to me like they’ve given more decision making back to the management here in Maine.”

Others aren’t so sure. CMP critic Rep. Seth Berry, D-Bowdoinham, co-chair of the Maine Legislature’s Energy, Utilities and Technology committee, has introduced a bill to create a “Maine Power Delivery Authority” that would buy out CMP and Emera from investors. Rogers, with the union, said Berry’s proposal helped pressure CMP to agree to the new staffing levels.

Berry welcomed the staffing agreement but said it doesn’t fix what’s wrong with CMP.

“Adequate staffing is long overdue,” Berry said. “It is a step in the right direction. But it does not fix the underlying issue at CMP, which is that it’s controlled by Spain and not Maine.”

As the company shed staff, usually due to retirements, its frontline workers would ask management about hiring replacements, said Ellis, the CMP troubleshooter who retired in January. The answer was always the same.

“‘It’s got to go to Spain for approval.’ That’s all we kept hearing,” Ellis said. But the approval never seemed to come.

“We just kept thinking this was their way of saying that we’re not going to get any more help,” Ellis said.

Current CMP linemen agreed.

“They tell us that they have to submit the paperwork and get approved by people in Spain,” said a current lineman who asked that his name not be used because he was not authorized to speak to the press. “They get sick of us asking the same questions, I’m sure. I’m not blaming local management. From what I can see, they’re just as stressed as we are.”

PUC staff had worries about foreign ownership when the commission was evaluating Iberdrola’s proposed purchase of CMP and its parent company.

[How CMP’s $1 billion hydro project could affect habitat in a wild corner of Maine]

“Iberdrola’s physical and language separation from Maine creates the potential that decisions affecting CMP may be removed from the local concerns of Maine’s citizenry and government,” PUC staff wrote in a November 2007 analysis.

“This is not a theoretical concern,” the staff continued. “Maine has experience with other utility acquisitions, and has observed the tendencies of large companies to treat as unimportant problems of an affiliate located in a relatively small and remote state.”

Today, CMP has roughly 620,000 customers, a group that makes up less than 2 percent of the 34.7 million customers serviced by Iberdrola across the U.S., Europe, Brazil and Mexico.

In an email response to a question about Iberdrola’s influence on CMP staffing levels, Hartnett wrote that “CMP has one parent company — AVANGRID.” But in Securities and Exchange Commission filings, Avangrid admits that Iberdrola controls the company.

“Iberdrola exercises significant influence over us, and its interests may be different than yours,” it warned shareholders in its 2018 annual report.

‘We started to get a little bit nervous’

While questions about CMP’s customer service have intensified since the creation of Avangrid, Dick Davies saw a gradual shift in CMP’s approach after Iberdrola bought the utility in 2008.

Appointed Maine public advocate by former Gov. John Baldacci, now vice chair of the Avangrid board of directors, Davies was responsible for representing customers’ interests before regulators from 2007 to 2013.

Davies said at first it seemed as if Iberdrola would take a hands-off approach to its new acquisition. But that slowly seemed to change.

“It was only later on as Iberdrola became more interested in reducing the workforce and cutting back on certain things… that we started to get a little bit nervous,” Davies said.

In 2010, for example, CMP reduced its workforce as part of the company’s transition to smart meters, which transmit customer usage data to the company electronically and reduce the need for CMP staff to physically take readings from customer meters. Eighty-five staff accepted voluntary early retirement, and another 36 accepted a severance package from the company in 2010, according to PUC filings.

The $200 million smart meter project was funded with the help of a $96 million federal grant. Iberdrola and its subsidiaries have received more than $2.2 billion in state, local and federal subsidies since 2000, according to corporate and government accountability watchdog Good Jobs First.

Davies said when Iberdrola took over CMP, the utility was “sort of a local company,” but within a few years he realized “that they were now a world company.”

“They were going to be doing whatever they needed to get an income level they decided they wanted to get, and they were not about to let local interests get in the way,” Davies said.

Like nearly all electric utilities, CMP is a monopoly. (Customers can’t choose to get electricity delivered by non-CMP power lines in the company’s service area.) Because the state has allowed CMP to operate a monopoly, CMP is subject to heavy state regulation. Part of that regulation involves determining how much profit CMP can make off ratepayers. Too much, and ratepayers are overcharged. Too little, and the company can’t attract the investment needed to keep the lights on. The industry standard is somewhere around 10 percent.

As part of this regulation, the PUC has set a cap on how much CMP can pay to affiliates like Avangrid for services the company used to have in-house. CMP can spend over this cap, but the PUC won’t allow CMP to be reimbursed by ratepayers for that amount.

The cap was instituted in 2001, not long after CMP first became a subsidiary when it was purchased by Energy East in 1999. The PUC has raised the cap over the years, and in 2013 it rose to $32.5 million.

[What you need to know about the CMP transmission line proposed for Maine]

CMP first exceeded the cap in 2016, according to PUC filings. From July 1, 2017, through June 30, 2018, CMP spent $42.8 million on affiliate services, outspending the cap by more than 30 percent.

In recent PUC filings, CMP has asked for the cap to be eliminated, noting that its sister utilities in other states aren’t subject to such a limit. But the PUC staff rejected this argument, noting that CMP agreed in 2014 to work with interested parties to develop a way to evaluate whether the payments to its affiliates were reasonable. But that never happened. And while CMP recently commissioned an ongoing study to look at the payments to Avangrid and affiliates, the study won’t answer the essential question about these payments: Would it be cheaper for CMP to do these things itself?

CMP’s failure to provide information about its payments to affiliates “makes it difficult if not impossible to judge the reasonableness” of CMP’s request to increase or eliminate the cap, PUC staff wrote.

Third largest fine ever levied

CMP’s billing system has been the source of many customer complaints since the company debuted it in late 2017. After the rollout, 100,000 accounts had billing errors, thousands of existing customers simply stopped getting bills, and thousands of new customers didn’t receive bills for months. At least a few thousand customers continue to have unresolved complaints about their bills nearly a year and a half later. Billing issues have prompted a PUC investigation as well as a lawsuit accusing the company of fraud.

Maine regulators found that inadequate staffing for the project was among many problems with the system rollout. After the new billing system went live, “insufficient numbers of staff slowed identification and correction of errors,” they said.

For utilities, problems stemming from the rollout of billing systems are not unusual. For example, Maine’s other investor-owned utility, Emera, rolled out a new billing system in 2015. The project ran 80 percent over budget, and the company’s mismanagement of the project was one of the factors that led Maine regulators to reject the utility’s full rate increase request in 2016.

For Iberdrola, the problems with CMP’s billing system rollout must seem all too familiar.

In June 2016, UK regulators fined ScottishPower, another Iberdrola-owned electric utility, 18 million pounds — about $23.5 million dollars — for breaking regulations related to “billing issues and complaints handling.” At the time, it was the third-largest fine the UK’s Office of Gas and Electricity Markets had ever levied, and regulators made clear the cause of the company’s violations was the rollout of a new billing system, which began in December 2012.

The billing and customer service problems identified by regulators seem to directly mirror the more recent issues at CMP. UK regulators wrote that the migration of ScottishPower customers to the new system “resulted in a number of customer service problems, including long call times, a large number of late bills,” customer complaints, and issues with its obligation “to record the handling of complaints.”

Regulators also noted that ScottishPower failed to resolve its issues until nearly a year and a half after they announced their investigation and blamed the botched rollout in part on the company’s failure to staff its customer contact centers.

Maine Focus is a journalism and community engagement initiative at the Bangor Daily News. Questions? Ideas? Write to mainefocus@bangordailynews.com.



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